September 12, 2025 • 37 mins
This week, Nobel laureate Paul Krugman discusses tariff “chaos”, how immigration policies limit productivity and New York City under a potential Mamdani administration. And, from airlines to apps, prices now change in real time, but who are the real winners in a dynamic pricing world? Plus, China dominates rare earths, but Brazil is willing to play the long game to establish a non-China supply chain for the magnets that power our technology.
See omnystudio.com/listener for privacy information.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:20):
This is Wall Street Week. I'm David Western, bre you
stories of capitalism. China and the United States are playing
a high stakes poker game over rare earths. We go
to South America to see whether Brazil may provide the
US with a winning hand. Plus, we're used to tracking
prices in capital markets moment by moment, why not the
(00:40):
same for our groceries. A supermarket chain in Norway points
the way to dynamic pricing for all sorts of goods
and services. But we begin with a conversation with Nobel
Prize winning economist Paul Krugman, former New York Times columnist
and a professor at the City University of New York.
We spoke to him about the American economy and the
(01:00):
costs and benefits of the Trump administration's policies. Starting the
day I take the oath of office, I will rapidly
drive prices down and we will make America affordable again.
Speaker 3 (01:14):
In the campaign, the big promise by Donald Trump was
that he was going to bring down prices and make
America affordable again. And everything he's done is the opposite
of that. So you know, if you were asking you
imported goods are going up in price. We're going to
see a lot more than that of that. But you know,
vegetables are going up in price, and a little bit
(01:35):
of that is tariffs, but a lot of that is.
Speaker 4 (01:37):
Farm workers are making themselves scarce.
Speaker 3 (01:41):
Because they're afraid that ice will pick them up if
we're worried about housing costs.
Speaker 4 (01:45):
A lot of the construction industry is immigrant.
Speaker 3 (01:47):
Workers, and particularly the actual physical jobs. The guys actually
up there on the roof tend to be immigrants, many
of them undocumented, and even the ones who are legal
are afraid.
Speaker 2 (02:00):
I think what really matters is the standard of living. Yeah,
for Americans across the board, what are we doing to
the standard of living? Are we improving it or are
we actually turning it down?
Speaker 3 (02:12):
Oh no, this is clearly all negative for the standard
of living. You're making when you put a tariff on
one way of putting it, a sort of standard economist
econ one on one thing is you're taking things that
we do relatively badly and other countries do relatively well,
and we're making and we're insisting that those things be
(02:33):
done here, which raises costs, reduces our sneot of living.
If we look at the immigration policies, the really important
thing about immigration in America is that the immigrants do
not do the same jobs that native born Americans do.
They're very concentrated in a limited number of industries and
(02:55):
occupations which are very much complementary to the jobs that
native born America is due. And by driving out the immigrants,
we are reducing the productivity, reducing ultimately the living standard
of the native born workers.
Speaker 2 (03:10):
Trump tariffs are a part of the story that Krugman
knows well. His Nobel Prize was awarded in two thousand
and eight for work on trade patterns. But he says
the tariffs themselves might not be the biggest problem.
Speaker 3 (03:24):
Consistent tariffs are bad, but not as bad as legend
has it.
Speaker 4 (03:29):
Right.
Speaker 3 (03:29):
You know, everybody's told said smooth holely caused the Great Depression.
Speaker 4 (03:32):
That's not remotely true. And if you run.
Speaker 3 (03:36):
Even Trump's terriffs as they stand at the moment through
a sort of standard model, that they will reduce GDP
by something like half a percentage point in the long run.
Speaker 4 (03:46):
They're serious. It's bad.
Speaker 3 (03:48):
It terrible things to you have credibility, because we're breaking
all of our agreements but it's not a huge thing.
What we've never had before is tariff's where nobody knows
what the tariff will be next month, let alone you know,
a year two years from now. It's this complete utter chaos.
(04:08):
It's sort of the whims of the president and then
the question of whether the courts even allow him to
do what he's doing, which beaks havoc with business. Any
investment that business makes right now has a good chance
of turning out to be a really bad investment because
the tariff rate isn't what you thought it would be.
Speaker 2 (04:25):
What about margins for corporations, because typically you might see
it show up there. It suggested that part of these
who are not seeing terraces, someone's being absorbed by exporters,
some by importers, and some by consumers.
Speaker 3 (04:36):
The exporters are not absorbed very much. We have independent
data on prices actually charged by foreign countries for their
exports to the United States, and those have not gone down,
so they does not look as if.
Speaker 4 (04:48):
Foreigners are absorbing a significant amount.
Speaker 3 (04:50):
It does look like US businesses have so far absorbed
a significant amount. Partly that's because they rushed inventory in
rushed imports in to front run the tariffs partly because
they not sure if the tariffs are here to stay.
They don't want to raise prices and alienate consumers until
they have no choice.
Speaker 4 (05:09):
But no, it.
Speaker 3 (05:10):
Looks quite significant, and it's really important also to understand that,
you know, this is not William McKinley's world economy.
Speaker 4 (05:18):
This is not what Trump thinks it is. This is
not a world in which.
Speaker 3 (05:22):
You export manufactured goods and you export farm goods and
that's it. This is a world of supply chains, complicated structures,
and very many of the tariffs are actually being levied
on inputs into US manufacturing. So this is doing a
lot to actually raise costs of US businesses as well, So.
Speaker 4 (05:40):
There isn't a lot of slack in the end.
Speaker 3 (05:43):
I'm enough of a you know, I may be a
kind of center left, but I don't believe that businesses
are making massive profits that are can just be legislated away,
so in the end, businesses.
Speaker 4 (05:53):
Won't be able to absorb them. And it's consumers.
Speaker 2 (05:56):
What about the stated goals of President Trump, whether he's
achieving them or not, one of them is actually protected
or bring back manufacturing jobs on shore of the United States?
Speaker 4 (06:05):
Is that a sensible goal.
Speaker 2 (06:07):
And by the way, how is it affecting the auto industry,
because the audustry is supposedly is one of the beneficiaries
of all of this.
Speaker 3 (06:12):
Yeah, the auto industry actually is sort of case and
point for Yeah, this is not actually working, and it's
for the auto industry. A lot of it has to
do with the fact that there isn't a US auto
industry because in North American auto industry it's very integrated
with Canada and Mexico. Parts of an individual car may
cross a border seven or eight times before you end
(06:33):
up with a finished vehicle. And all of this stuff
is adding costs. So the auto industry is particularly ill suited.
You know, steel and aluminum. What do you make cars
out of? And we have tariffs on steel and aluminum.
Speaker 2 (06:43):
Could there be an ironic unintended effect which is actually,
as you put more and more pressure on the costs
for manufacturers, they automate more. So it doesn't turn it
into jobs. It might turn into GDP doesn't turn into jobs.
Speaker 3 (06:56):
Well, just in general, even aside from the cost pressure. Specifically,
if you ask yourself which industries might be induced to
come back to the United States, it'll be industries where
the labor cost disadvantage is not too large. We're not
going to be bringing back apparel. There's just no way
unless you have just you know, hundreds of percent tariffs
(07:19):
that we're going to bring clothing manufacture back from Bangladesh
to the Carolinas. What you can bring back, conceivably are
industries where they're very capital intensive. Robots do a lot
of the work, so we may be creating more jobs
for robots, but not a whole lot of jobs for
US workers.
Speaker 2 (07:38):
There is the effect apparently here from Secretary Vesent on
the deficit. Then in fact, we are putting a lot
more money into the treasury because of these tariffs. Is
it helping us on the debt and deficit?
Speaker 3 (07:51):
Well, in the direct effect. Look, tariffs are basically a tax.
There are sales tax that are levied on selected goods,
sales tax on goods that we import. And sure if
I put on a national sales tax, it would raise
revenue and reduce the deficit. And you know a lot
of economists have said the United States really should have
(08:11):
a value added tax, which is basically a sales tax,
and most other advanced countries do that, and we kind
of could use the money. So through a backdoor route,
Trump is making America a little bit more like Denmark
with a sales tax paying for part of the butt.
Speaker 4 (08:28):
But it's really not going to be enough money.
Speaker 2 (08:30):
The secret investment is that it's like three hundred billion dollars.
Speaker 3 (08:33):
It's extremely unlikely that we'll get that much, although it's
possible if we're increasing tariffies by around fifteen points, that
could get you to several hundred billion dollars. But the
idea that if you impose a tax it raises money
is that's not an exotic that's not a policy triumph.
Speaker 4 (08:49):
That's just how budgets work.
Speaker 2 (08:51):
Are you concerned about the long term permitI effects of
what's happening right now rather than just the ups and
downs the vicissitudes of an electoral system peop Well.
Speaker 3 (09:00):
Don't I think fully realize is that on tariffs, almost
everything Trump has done is probably illegal under US law,
but definitely a violation of international agreements. I mean, we
have we built the world trading system, and we built
I say we because that's the United States. The US
(09:20):
created this thing, which is a system of.
Speaker 4 (09:22):
Rules and laws.
Speaker 3 (09:24):
We've just ripped up a whole system of trading and agreements,
the system that we built over ninety years, because if
this really goes back to FDR, you.
Speaker 4 (09:31):
Don't put that back together.
Speaker 3 (09:34):
Even if the next president says, okay everything, my first
act is to undo everything Trump did. The United States
will never be trusted again. We used to be a
country where if we made an agreement, that was an agreement.
I mean I was in the Reagan administration working on
trade things, and there would be meetings in which some
(09:55):
proposal would defloat it, and the guy from the US
Trade rep Office would say, that would degat illegal General
Agreement on taris and Trade. Which finds this and end
of discussion. In the Reagan administration, if it was a
violation of our international agreements, we didn't do it. This
administration doesn't care. They don't even try to justify violating these.
Speaker 2 (10:16):
Agreements, even as the Trump administration charts a very different
economic path for the US overall. Krugman's home city of
New York is facing its own potential shift, as the
self proclaimed democratic socialist Zoron Mamdani is ahead in the
polls for the mayoral race. Krugman is more sanguine about
(10:37):
what that could.
Speaker 3 (10:38):
Mean, what we call a socialist in America would be
just kind of a social democrat in Europe. It's really
not extreme. Some of his proposals might be a little
I'm not sure about the rent stuff. I actually don't
think that opening some city run groceries is a problem,
and in practice would almost surely govern pretty much just
(11:04):
a slightly more populous version of what we have.
Speaker 4 (11:08):
I don't think we need to worry about radical change.
Speaker 2 (11:11):
But the rent stuff, as you called it. If the
problem is affordability of housing in New York, really freezing
rents is not traditionally the way to get more housing
stock built.
Speaker 3 (11:24):
Yeah, but what he's talking about is not freezing all rents.
He's talking about stabilizing stuff that's already rent controlled, and
so it's really it's a policy at the margin. It's
probably not likely to have much effect on housing construction,
and it does sound from other things he said that
he really would try to get a lot of housing built,
and that's the important thing.
Speaker 4 (11:45):
I'm not really worried about that.
Speaker 3 (11:47):
And it's the panic over what really wouldn't be very
different from the way New York City has been governed.
It is all wrong, and it would take a lot
to really ruin the city. Resilience of New York City
has just been amazing over the years.
Speaker 2 (12:06):
Coming up, what if our supermarket could change its prices
several times a day depending on market conditions, We look
at the economics of dynamic pricing and why it might
be a good deal for both buyers and sellers. This
(12:28):
is a story about making a market, bringing willing buyers
and willing sellers together to agree on a price. When
it comes to things like securities, commodities, and currencies, prices
are set moment by moment. But what about goods and services.
Why shouldn't the price of a dozen eggs float just
the way the price of a stock or a bond does.
Speaker 5 (12:50):
It's electrical sale labels that shows the price, It shows
the product information that the customer needs. Basically just a
pay label, digitalized and we are able to change the
price within minutes if we if we want to.
Speaker 2 (13:05):
And for that matter, why leave it at the price
of goods? What about a variable price for labor?
Speaker 6 (13:12):
Where we're at is that robots are deciding what prices
are robuts are deciding how much workers get paid.
Speaker 2 (13:20):
Call it what you will, Dynamic pricing, surge pricing, or
surveillance pricing. It all comes down to the same thing.
Speaker 7 (13:28):
Every firm has an incentive to charge a different price
to different customers at different point in time. The reason
is because if a consumer we needs to pay is
a change in As a firm, what I want to
do is to charge your high price and when you're winning,
to pay high price, and charge your low price.
Speaker 8 (13:44):
When you're winning, to pay low price.
Speaker 2 (13:46):
John Jang is a professor at the Wharton School of Business.
Speaker 7 (13:51):
As a firm, I really have an incentive to make
sure that when you're winning to pay a high price,
I'm going to charge your high price.
Speaker 2 (13:58):
Dynamic pricing may sound revolutionary to some, but it's actually
as old as the markets themselves. What's changed is the
technology and in some cases the laws.
Speaker 7 (14:09):
If you go back probably hundreds of years and then
to the village of free markets, the vendors there obviously
just a use of the dynamic pricing. They're going to
change the price depending on who are the customers who
show up, and also depending on when you're showing up.
Speaker 2 (14:26):
Modern day dynamic pricing began in the seventies after the
airlines were deregulated nowadays, it can mean charging different prices
based on overall demand at different times, or even charging
different individual buyers according to their willingness to pay.
Speaker 7 (14:43):
Variable price in basic means that as a firm, I'm
going to charge different prices for different products in different
usage occasions and also depending on who the customers they
are dealing with. Dynamic pricing if you look at it
and really have law has multiple dimensions, and you don't
just change the price over time.
Speaker 8 (15:02):
You also charge a.
Speaker 7 (15:03):
Different prices across different products you have to sell. And
also for the same product you may actually charge you
at different prices across different customers. For the same customer,
you also charge different prices over time.
Speaker 2 (15:18):
In Norway, supermarket chain Rema one thousand has been using
dynamic pricing since twenty twelve across its six hundred and
eighty retail stores. Perhaps Sandu is Rema one thousand's head
of pricing.
Speaker 5 (15:31):
So the market in Norway is quite competitive. We want
to be cheapest on Christmas holda, so we lower the
price ten cents lower than our competitors, and they might
be having the same strategy as we have, so they'll
go even ten cents lower and then we get these
kind of rays to the bottom situations where we try
(15:52):
to beat each other and the price gets really really low. Basically,
you get lower price when the demand is high, So
we don't set the price up when the demand is highway,
we rather set the price low when the demand is high.
Speaker 2 (16:08):
Charging what the market will bear makes good sense from
the perspective of a seller like Remo one thousand. It
can help make sure that it's not being undercupp five
competitors and that no money gets left on the table.
But the buyers whose money is being taken have not
always been as enthusiastic.
Speaker 7 (16:25):
When there's a flirt with this idea of doing the
surge priceing for burgers, and that they're trying to learn
from the Woober Woober. Of course, in this particular situation,
the surge price really helps the consumers, so there wasn't
a whole lot of back lag when you surge a priceing.
On the one hand, you're going to manage the demand
simply because the more people probably will decide that they're
(16:47):
not going to take a Wooper, they're going to take
a subware, take the bus, and on so force. Most importantly,
a surge pricing will help you to do more cars
into Manhattan, so that a supply for the cars would
increase every customer who want to take a Whooper and
actually have access to a Woober. In Wendy case, that's
not the situation. When you searge a price in at
(17:08):
lunchtime when people are hungry, you don't necessarily increase your
supplying anyway, and the consumers don't see any benefit in
that surge price. And so that's why there's huge backlash
from the marketplace.
Speaker 2 (17:21):
It's not just the Wendy's experience that's drawn attention. In
the US. Senators Elizabeth Warren and Robert Casey took issue
with Kroger's use of electronic shelf labels and dynamic pricing,
saying widespread adoption of digital price tags appears poised to
enable large grocery stores to squeeze consumers to increase profits.
(17:43):
But despite some complaints, Professor Jeng says that dynamic pricing
is not always bad for the consumer.
Speaker 7 (17:50):
For instance, for the trend tickets from Philadelphia to New York, Okay,
the price can vary between ten dollars all the way
up to two hundred dollars vigilant if you know what
you're doing, if you really pay attention to the pricing,
and you may actually get the chance to buy a
trend ticket from Philadelphia to New York at the price
(18:11):
of aout ten dollars. I know my son is very
good at doing this and nowadays because it does travel
quite a bit and between Philadelphia and the New York
So in that sense, that indeed that uncertainty in this
kind of a situation, If you know what you're doing,
if you want to make an effort, it could be
beneficial to you.
Speaker 8 (18:30):
As a consumer.
Speaker 2 (18:32):
Dynamic pricing can benefit the seller of airline tickets or
supermarket items, But what if the thing being sold is
your labor? How might dynamic pricing work if applied to
how much we make for a living? The question is
not hypothetical. Any contractor or freelancer will tell you how
their take home pay can change depending on the day,
but for some workers it comes down to the minute
(18:54):
or even the second.
Speaker 6 (18:57):
So a couple of years ago, lift Awn Uber moved
into what's called algorithmic pricing. So, in other words, there
is no percentage that we actually get of the fare,
and there is no rate card that tells you how
much you're going to make per mile, how much you're
going to make per mint it. On the driver side,
(19:18):
you think, oh, well that'll be good for drivers. You know,
oh maybe they're charging me a lot, but my driver
will get that. No, because guess what they're looking for
us is our lowest fare point. So let's say you
tend to take whatever ride comes across, they will pay
you lower and lower and lower. It's death for us.
(19:39):
So if you see a twenty mile ride, come in
and they're going to pay you ten dollars for that,
that's fifty cents a mile period, you're losing money on that.
I think for me as Americans, we want innovations. We
want to be able to rely on tech. We love
our phones. All of that is really good, but we
(20:00):
you really have to look at some of the downstream
that isn't good about this tech in order to bring
it home, to protect consumers, to protect our environment, to
protect workers' rights.
Speaker 7 (20:12):
I think that for employees, salaries have always been dynamic,
and especially in an inflationary environment, they know that the
salary are on the rise, and even though that real
wages may or may not add to an increase.
Speaker 2 (20:28):
Jang says that Dynamic pricing is also a double edged sword.
Even though it can give companies more ways to compete,
it can also push them to compete away their margins
if they're not careful.
Speaker 7 (20:39):
Dynamic price and surprising is always good for a firm
in the short term. If you know what you're doing,
and if you can identify when a customer is willing
to pay high price or low price, and you have
a good way to implement it, it's always good for
you somebody because you're going to generate more incremental revenues.
You're going to in fact increase your profitability for sure.
(21:01):
But one downside with dynamic present is this. You look
at the airline industry, for instance, it's probably one of
the earliest and the most sophisticated industry where dynamic price
and was introduced. But if you look at the cumulative
of profitability for airline industry and since the regulation in
nineteen seventy eight, you know that, in fact that the
(21:24):
cumulative profitability is either zero or slightly negative.
Speaker 8 (21:29):
Okay, So there we.
Speaker 7 (21:31):
See that the industry that's very sophisticated dynamic price and
yet that the whole industry seemed to be suffering because
of it, and there is a good reason for that.
And the reason is because unilaterally, as a firm, you
want to implement dynamic prices no matter what other firms
are doing.
Speaker 2 (21:50):
One key consideration for firms looking to introduce dynamic pricing,
it matters when you do it, such as for example,
when people may be expecting some higher price is because
of teriffs.
Speaker 7 (22:01):
If you look at the terriff situation, the price and
environment is really becoming more uncertain and the most important
need that and we are putting into and an inflationary environment.
You can imagine that inflationary environment, consumers tend to be
more for giving for any price increase and the certainty
(22:23):
and would be more for giving and for price variations.
And so because of that, you can imagine us a
firm if I always want to embrace dynamic price and
this would be a good chance. And simply because if
I vary the price, the consumers property will not and
the mind as much. And the most importantly that if
I raise the price and I have alibi and to
(22:46):
tell consumers.
Speaker 2 (22:48):
And even more important than picking the right time to
move to dynamic pricing may be positioning it the right
way for your customers you.
Speaker 7 (22:56):
Want to do the dynamic discounting. I think that's a
good way to do it. In fact, you look at
the way that firms implement dynamic price and the mistake
of them making is basically that, oh, our price is
going to go up and down.
Speaker 8 (23:08):
Right, So that's the one way to do it.
Speaker 7 (23:11):
The other way to do it in the business said, well,
we have all this price, that's a regular price. We
just offer dynamic discounts right over time and everybody gets
a two fee, and so that in that situation everybody
feels better.
Speaker 2 (23:24):
Call it surge pricing, and it doesn't sound like there's
much in it for the consumers. But dynamic discounts, that
sounds more like we are all getting a trophy up next.
Rare earths are critical to our tech future, and China
has had a corner on the market. We look for
alternatives in Brazil. This is a story about a high
(23:55):
stakes game of poker between China and the rest of
the world. To China has played one winning hand after
another in the game of rare earth minerals, bluffing from
time to time to get the world to play by
its rules. But don't count out the underdogs. Our colleague
David Goura takes us to Brazil to see how the
international competition is shaping up.
Speaker 9 (24:23):
This is a very pure concentrate of rrors.
Speaker 10 (24:25):
It contains around ninety five of concentration of rrors and
in these bagders around five to six percent of this
prosumana terbum.
Speaker 11 (24:34):
These are two of the seventeen metallic elements that make
up what are known as rare earth elements. Dysprosium and
turbium are heavy rare earths used to create magnets in
electric vehicles. We went to Guyania, Brazil to see one
step in the long process of turning clay into some
of the most valuable material on the planet. But most
(24:56):
of us already interact with rare earth elements every day.
Speaker 10 (25:00):
As the world becomes more electrical, we're going to be
converting a lot of electricity into movement. No, we're seeing
that in electric vehicles, we see that in wind turbines.
Speaker 9 (25:10):
We're going to see that a lot in robotics.
Speaker 10 (25:12):
So we care about the errors that go into the
permanent magnet.
Speaker 11 (25:16):
Ramon Breua Costa is the CEO of a Clara Resources,
a mining company based in Chile. This is the company's
pilot plant in Brazil. Help me understand scales. Compare what
you're producing here to what you would need to produce
going forward. How far from that are you?
Speaker 9 (25:32):
It is very small. It is very small.
Speaker 10 (25:33):
We can process several tones of clays here, but out
of one tone we extract around one hundred rams, so
it's around zero point one percent of production.
Speaker 9 (25:42):
So for demonstration purposes it works very well.
Speaker 10 (25:45):
It will provide This pilot plant also will provide the
material that we need in order to prove our separation facility.
Speaker 11 (25:53):
A Clara gets mineral deposits that it processes. What it
can process is a drop in the bucket.
Speaker 10 (26:00):
China has an advantage because they have a type of
deposit that is called an ionic lay, and they use
it to extract these these elements. They are so important
and so scarce that China has been restricted precisely these elements.
Speaker 11 (26:14):
Brazil comes in a distant second behind China in deposits,
but deposits are just one part of the story. Another
more expensive part is processing the raw materials, and that's
where China really calls the shots.
Speaker 10 (26:29):
We do know that they discovered the ionic lay deposits
in the nineteen seventies, so they have been mining these
elements for fifty years.
Speaker 9 (26:36):
Now.
Speaker 10 (26:37):
We know that they are also attracting revers from Me
and Mark, and we know that in the case of
heavy revers, the quota of production in China has been
very stable for the last fifteen years. In vers in general,
they control around sixty percent of the market. In the
case of heay reers is probably very close to one
hundred percent of the market.
Speaker 11 (26:55):
China has also used its dominance in the rare earth
supply chain to further its political ambitions, a tactic that
Laura Taylor Khalai saw first hand as Assistant Secretary of
Defense for Industrial based Policy under President Biden.
Speaker 12 (27:10):
It's China that dominates in mining. When we take a
look at processing of rare earth elements, it's also China,
Malaysia of Japan that account for one hundred percent of
the processing, with China completely dominating that process.
Speaker 11 (27:28):
Taylor Calla was responsible for setting America's rare earth strategy
in the Biden administration. She remembers when the US was
holding the strongest hand.
Speaker 12 (27:37):
It was a time when the United States was the
dominant producer of rare earth elements and processing, and over
the years that has changed significantly. We are now importing
ninety third percent ninety five percent of our rare earths
from China, including the ones that for a while, even
(27:58):
including the ones that we use in major defense systems.
So it's a very real vulnerability and a very real
vulnerability when we know and have seen of recent and
over the years, China's willingness to use their dominance of
rare earth mining and processing to manipulate markets and to
(28:21):
stemy competitors global competitors.
Speaker 11 (28:24):
For the past fifteen years, China has used its dominance
in rare earth to get more favorable terms in trade deals.
Speaker 12 (28:32):
We need to continue this kind of minerals diplomacy as
well as take it into account in these economic and
trade negotiations. Again, you could play hardball with Canada and
with Japan and with other countries South Africa DRC, but
we also they also had things that we need, including
(28:52):
these rare earth elements, whether it's in the raw form
and mining or also in potential processing capacity industrial capacity.
Speaker 11 (29:01):
American policymakers also know that diplomacy alone isn't enough. Over
the past five years, the US has allocated hundreds of
millions of dollars to rare earth processing plans and magnet factories.
With President Trump picking up the baton from the Biden administration.
Speaker 6 (29:18):
I will also take historic action to dramatically expand production
of critical minerals and rare earths here in the USA.
Speaker 12 (29:27):
The United States hasn't completely been out of the game
and hasn't completely been blind to this. We also have
within I'll just speak within Defense in particular because I
think it's an important national security case. Within Defense, we
have taken over the years the notion of looking at
(29:49):
our defense in terms of short term priorities, particularly under
the Biden administration. According to the National Defense Industrial Strategy
that I help launch and author out of the Defense Department,
we made a concerted push for a mind to magnet
(30:10):
strategy for rare earth elements, in particular, understanding that the
F thirty five magnets or particular vulnerability, as well as
other key systems like the Virginia Class submarines and the
Columbia Class submarines. We made investments in MP materials through
the Defense Logistics Agency, which administers the National Defense Stockpile
(30:34):
through the Defense Production Act Title III, as well as
through the Industrial Base Fund. All of these things are
in existence now, and because of the investments that we
made over the last four years, and in particular of
showing Congress that we could effectively use the authorities that
we have as long as we had appropriations. I think
(30:57):
we've gotten to a point where this administry and can
really run fast.
Speaker 11 (31:02):
But Taylor Kala admits that today it's become a game
of catch up for the US.
Speaker 12 (31:07):
I think from our standpoint, mining and processing of a
rare earth is messy, it's expensive, there's a lot of
environmental issues that come up as a result. Sometimes it's
a lot easier to import these things rather than to
produce them domestically. We also don't have the workforce that
can really support of the processing and mining of rare
(31:33):
earth elements and other critical coretical minerals. China dominates in
that sense as well.
Speaker 11 (31:39):
Back in Brazil, A Claras Berua knows just how expensive
and time consuming it is to get a foothold in
the rare earth supply chain.
Speaker 9 (31:47):
I think the work that we have.
Speaker 10 (31:48):
Been able to accomplish will allow us to have a
marginal cost of production that is competitive with China. We
have created a system called the circular mineral harvesting.
Speaker 9 (32:01):
That where we do not use explosives, there's.
Speaker 10 (32:03):
No crashing and no milling, which are the two stages
that consume most.
Speaker 9 (32:06):
Of the energy in the industry. We need to make the.
Speaker 10 (32:08):
Investment, and that cost of capital is adding to our
cost of production, and that's where we lose competitiveness visa v.
Speaker 9 (32:16):
China.
Speaker 10 (32:17):
So the name of the game right now is try
to secure the lowest cost of capital possible. Governments play
a fantastic role there. There are grants available, we've seen
them deployed in several other companies. Low cost loans will
also help achieve that, and we have a clatter we're
prepared to pass through that lower cost of capital into
(32:38):
our customers in order to become a producing asset.
Speaker 11 (32:43):
Brazil is doing its part to attract miners like a
Klara to its mineral reserves.
Speaker 13 (32:48):
As a CATO, we treat the issue of strategic minerals
with great attention, care and strategy. Everything that is happening
in this context now we have already understood to be
an extremely timely and important action for Brazil and for
the world. Given our countries potential.
Speaker 11 (33:10):
In Aciomelo is the President of Brazil's Geological Service, which
is part of its Ministry of Mining.
Speaker 13 (33:18):
When we talk about change, we think about strategic minerals,
strategic and we already had this strategy before all this
the current situation. This is due to the care and
work of President Lula and Minister in partnership with them.
Speaker 11 (33:43):
One of the agency's main functions is to map out
the country's mineral resources, a critical first step in catching
up with China. Even there the odds are long.
Speaker 13 (33:55):
Around thirty percent of Brazil has been made. We know
that isn't a lot yet, but with the contract we
have just signed and this extremely advanced technology technology which
is also used by major global players such as Australia,
the USA, Germany and Canada.
Speaker 8 (34:18):
Technology.
Speaker 13 (34:19):
With this technology, our goal is to attract safe, sustainable
investments to advance the development of rare earth and other
minerals that are part of this process.
Speaker 4 (34:33):
Conditions.
Speaker 10 (34:35):
The reception that we have had in Brazil has been
incredibly good, both from the federal government and from the
local government of the state of Oyas. I think something
that should not be taken for granted is that Brazil
has a vision in terms of the role that they
want to play in the future, and that is I
would say, I would call it a contry vision. Everybody
(34:56):
shares this, and so when you present them with a
product like this is everyone wants to help.
Speaker 11 (35:02):
That need for a non China rare earth supply chain
is so great that among countries and companies, a competitive
industry has morphed into a forced collaboration.
Speaker 10 (35:12):
Very recently, I saw an article that there were forty
rareth companies already in Brazil.
Speaker 9 (35:17):
But again, we don't feel that they are a direct
competition of ours.
Speaker 10 (35:21):
No, we care only about those who can produce heavy
errors effectively.
Speaker 9 (35:27):
How are differentiating ourselves?
Speaker 10 (35:29):
I think we have two main factors that make a
CLATA very different.
Speaker 9 (35:33):
We want to do it all no.
Speaker 10 (35:35):
That opens strategic opportunities, commercial opportunities that other miners don't
necessarily have. And the other thing that I believe is
a very strong advantage of the a CLATA proposition is
our shareholders.
Speaker 12 (35:49):
No.
Speaker 9 (35:50):
Right now, the Hawkshild group owns fifty.
Speaker 10 (35:52):
Seven percent of a CLARA and the cap group owns
ten percent of a CLADA. If I start with a
Hogshi group, this is a group that has more than
a one hundred years operating in Latin America doing mining
and doing industry, doing innovation and becoming suppliers.
Speaker 9 (36:08):
You know of very sophisticated industries all around the world.
So it's in our DNA to be long term suppliers.
Speaker 10 (36:15):
And again I think that what this industry is looking
for is not molecules.
Speaker 9 (36:19):
No, they're not looking for neo imium, pressly immum. This
is prossium or terribum. They're looking for permanent magnets.
Speaker 10 (36:25):
No, so they need and the keyword right now, even
much more than price, is reliability.
Speaker 11 (36:31):
Brazil is betting that it can offer that reliability to
the world. Barua thinks Brazil has what could be a
winning hand. It just has to play its cards right.
Speaker 2 (36:42):
That does it for us. Here at Wall Street Week,
I'm David Western. See you next week for more stories
of capitalism.
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:20):
This is Wall Street Week. I'm David Western, bre you
stories of capitalism. China and the United States are playing
a high stakes poker game over rare earths. We go
to South America to see whether Brazil may provide the
US with a winning hand. Plus, we're used to tracking
prices in capital markets moment by moment, why not the
(00:40):
same for our groceries. A supermarket chain in Norway points
the way to dynamic pricing for all sorts of goods
and services. But we begin with a conversation with Nobel
Prize winning economist Paul Krugman, former New York Times columnist
and a professor at the City University of New York.
We spoke to him about the American economy and the
(01:00):
costs and benefits of the Trump administration's policies. Starting the
day I take the oath of office, I will rapidly
drive prices down and we will make America affordable again.
Speaker 3 (01:14):
In the campaign, the big promise by Donald Trump was
that he was going to bring down prices and make
America affordable again. And everything he's done is the opposite
of that. So you know, if you were asking you
imported goods are going up in price. We're going to
see a lot more than that of that. But you know,
vegetables are going up in price, and a little bit
(01:35):
of that is tariffs, but a lot of that is.
Speaker 4 (01:37):
Farm workers are making themselves scarce.
Speaker 3 (01:41):
Because they're afraid that ice will pick them up if
we're worried about housing costs.
Speaker 4 (01:45):
A lot of the construction industry is immigrant.
Speaker 3 (01:47):
Workers, and particularly the actual physical jobs. The guys actually
up there on the roof tend to be immigrants, many
of them undocumented, and even the ones who are legal
are afraid.
Speaker 2 (02:00):
I think what really matters is the standard of living. Yeah,
for Americans across the board, what are we doing to
the standard of living? Are we improving it or are
we actually turning it down?
Speaker 3 (02:12):
Oh no, this is clearly all negative for the standard
of living. You're making when you put a tariff on
one way of putting it, a sort of standard economist
econ one on one thing is you're taking things that
we do relatively badly and other countries do relatively well,
and we're making and we're insisting that those things be
(02:33):
done here, which raises costs, reduces our sneot of living.
If we look at the immigration policies, the really important
thing about immigration in America is that the immigrants do
not do the same jobs that native born Americans do.
They're very concentrated in a limited number of industries and
(02:55):
occupations which are very much complementary to the jobs that
native born America is due. And by driving out the immigrants,
we are reducing the productivity, reducing ultimately the living standard
of the native born workers.
Speaker 2 (03:10):
Trump tariffs are a part of the story that Krugman
knows well. His Nobel Prize was awarded in two thousand
and eight for work on trade patterns. But he says
the tariffs themselves might not be the biggest problem.
Speaker 3 (03:24):
Consistent tariffs are bad, but not as bad as legend
has it.
Speaker 4 (03:29):
Right.
Speaker 3 (03:29):
You know, everybody's told said smooth holely caused the Great Depression.
Speaker 4 (03:32):
That's not remotely true. And if you run.
Speaker 3 (03:36):
Even Trump's terriffs as they stand at the moment through
a sort of standard model, that they will reduce GDP
by something like half a percentage point in the long run.
Speaker 4 (03:46):
They're serious. It's bad.
Speaker 3 (03:48):
It terrible things to you have credibility, because we're breaking
all of our agreements but it's not a huge thing.
What we've never had before is tariff's where nobody knows
what the tariff will be next month, let alone you know,
a year two years from now. It's this complete utter chaos.
(04:08):
It's sort of the whims of the president and then
the question of whether the courts even allow him to
do what he's doing, which beaks havoc with business. Any
investment that business makes right now has a good chance
of turning out to be a really bad investment because
the tariff rate isn't what you thought it would be.
Speaker 2 (04:25):
What about margins for corporations, because typically you might see
it show up there. It suggested that part of these
who are not seeing terraces, someone's being absorbed by exporters,
some by importers, and some by consumers.
Speaker 3 (04:36):
The exporters are not absorbed very much. We have independent
data on prices actually charged by foreign countries for their
exports to the United States, and those have not gone down,
so they does not look as if.
Speaker 4 (04:48):
Foreigners are absorbing a significant amount.
Speaker 3 (04:50):
It does look like US businesses have so far absorbed
a significant amount. Partly that's because they rushed inventory in
rushed imports in to front run the tariffs partly because
they not sure if the tariffs are here to stay.
They don't want to raise prices and alienate consumers until
they have no choice.
Speaker 4 (05:09):
But no, it.
Speaker 3 (05:10):
Looks quite significant, and it's really important also to understand that,
you know, this is not William McKinley's world economy.
Speaker 4 (05:18):
This is not what Trump thinks it is. This is
not a world in which.
Speaker 3 (05:22):
You export manufactured goods and you export farm goods and
that's it. This is a world of supply chains, complicated structures,
and very many of the tariffs are actually being levied
on inputs into US manufacturing. So this is doing a
lot to actually raise costs of US businesses as well, So.
Speaker 4 (05:40):
There isn't a lot of slack in the end.
Speaker 3 (05:43):
I'm enough of a you know, I may be a
kind of center left, but I don't believe that businesses
are making massive profits that are can just be legislated away,
so in the end, businesses.
Speaker 4 (05:53):
Won't be able to absorb them. And it's consumers.
Speaker 2 (05:56):
What about the stated goals of President Trump, whether he's
achieving them or not, one of them is actually protected
or bring back manufacturing jobs on shore of the United States?
Speaker 4 (06:05):
Is that a sensible goal.
Speaker 2 (06:07):
And by the way, how is it affecting the auto industry,
because the audustry is supposedly is one of the beneficiaries
of all of this.
Speaker 3 (06:12):
Yeah, the auto industry actually is sort of case and
point for Yeah, this is not actually working, and it's
for the auto industry. A lot of it has to
do with the fact that there isn't a US auto
industry because in North American auto industry it's very integrated
with Canada and Mexico. Parts of an individual car may
cross a border seven or eight times before you end
(06:33):
up with a finished vehicle. And all of this stuff
is adding costs. So the auto industry is particularly ill suited.
You know, steel and aluminum. What do you make cars
out of? And we have tariffs on steel and aluminum.
Speaker 2 (06:43):
Could there be an ironic unintended effect which is actually,
as you put more and more pressure on the costs
for manufacturers, they automate more. So it doesn't turn it
into jobs. It might turn into GDP doesn't turn into jobs.
Speaker 3 (06:56):
Well, just in general, even aside from the cost pressure. Specifically,
if you ask yourself which industries might be induced to
come back to the United States, it'll be industries where
the labor cost disadvantage is not too large. We're not
going to be bringing back apparel. There's just no way
unless you have just you know, hundreds of percent tariffs
(07:19):
that we're going to bring clothing manufacture back from Bangladesh
to the Carolinas. What you can bring back, conceivably are
industries where they're very capital intensive. Robots do a lot
of the work, so we may be creating more jobs
for robots, but not a whole lot of jobs for
US workers.
Speaker 2 (07:38):
There is the effect apparently here from Secretary Vesent on
the deficit. Then in fact, we are putting a lot
more money into the treasury because of these tariffs. Is
it helping us on the debt and deficit?
Speaker 3 (07:51):
Well, in the direct effect. Look, tariffs are basically a tax.
There are sales tax that are levied on selected goods,
sales tax on goods that we import. And sure if
I put on a national sales tax, it would raise
revenue and reduce the deficit. And you know a lot
of economists have said the United States really should have
(08:11):
a value added tax, which is basically a sales tax,
and most other advanced countries do that, and we kind
of could use the money. So through a backdoor route,
Trump is making America a little bit more like Denmark
with a sales tax paying for part of the butt.
Speaker 4 (08:28):
But it's really not going to be enough money.
Speaker 2 (08:30):
The secret investment is that it's like three hundred billion dollars.
Speaker 3 (08:33):
It's extremely unlikely that we'll get that much, although it's
possible if we're increasing tariffies by around fifteen points, that
could get you to several hundred billion dollars. But the
idea that if you impose a tax it raises money
is that's not an exotic that's not a policy triumph.
Speaker 4 (08:49):
That's just how budgets work.
Speaker 2 (08:51):
Are you concerned about the long term permitI effects of
what's happening right now rather than just the ups and
downs the vicissitudes of an electoral system peop Well.
Speaker 3 (09:00):
Don't I think fully realize is that on tariffs, almost
everything Trump has done is probably illegal under US law,
but definitely a violation of international agreements. I mean, we
have we built the world trading system, and we built
I say we because that's the United States. The US
(09:20):
created this thing, which is a system of.
Speaker 4 (09:22):
Rules and laws.
Speaker 3 (09:24):
We've just ripped up a whole system of trading and agreements,
the system that we built over ninety years, because if
this really goes back to FDR, you.
Speaker 4 (09:31):
Don't put that back together.
Speaker 3 (09:34):
Even if the next president says, okay everything, my first
act is to undo everything Trump did. The United States
will never be trusted again. We used to be a
country where if we made an agreement, that was an agreement.
I mean I was in the Reagan administration working on
trade things, and there would be meetings in which some
(09:55):
proposal would defloat it, and the guy from the US
Trade rep Office would say, that would degat illegal General
Agreement on taris and Trade. Which finds this and end
of discussion. In the Reagan administration, if it was a
violation of our international agreements, we didn't do it. This
administration doesn't care. They don't even try to justify violating these.
Speaker 2 (10:16):
Agreements, even as the Trump administration charts a very different
economic path for the US overall. Krugman's home city of
New York is facing its own potential shift, as the
self proclaimed democratic socialist Zoron Mamdani is ahead in the
polls for the mayoral race. Krugman is more sanguine about
(10:37):
what that could.
Speaker 3 (10:38):
Mean, what we call a socialist in America would be
just kind of a social democrat in Europe. It's really
not extreme. Some of his proposals might be a little
I'm not sure about the rent stuff. I actually don't
think that opening some city run groceries is a problem,
and in practice would almost surely govern pretty much just
(11:04):
a slightly more populous version of what we have.
Speaker 4 (11:08):
I don't think we need to worry about radical change.
Speaker 2 (11:11):
But the rent stuff, as you called it. If the
problem is affordability of housing in New York, really freezing
rents is not traditionally the way to get more housing
stock built.
Speaker 3 (11:24):
Yeah, but what he's talking about is not freezing all rents.
He's talking about stabilizing stuff that's already rent controlled, and
so it's really it's a policy at the margin. It's
probably not likely to have much effect on housing construction,
and it does sound from other things he said that
he really would try to get a lot of housing built,
and that's the important thing.
Speaker 4 (11:45):
I'm not really worried about that.
Speaker 3 (11:47):
And it's the panic over what really wouldn't be very
different from the way New York City has been governed.
It is all wrong, and it would take a lot
to really ruin the city. Resilience of New York City
has just been amazing over the years.
Speaker 2 (12:06):
Coming up, what if our supermarket could change its prices
several times a day depending on market conditions, We look
at the economics of dynamic pricing and why it might
be a good deal for both buyers and sellers. This
(12:28):
is a story about making a market, bringing willing buyers
and willing sellers together to agree on a price. When
it comes to things like securities, commodities, and currencies, prices
are set moment by moment. But what about goods and services.
Why shouldn't the price of a dozen eggs float just
the way the price of a stock or a bond does.
Speaker 5 (12:50):
It's electrical sale labels that shows the price, It shows
the product information that the customer needs. Basically just a
pay label, digitalized and we are able to change the
price within minutes if we if we want to.
Speaker 2 (13:05):
And for that matter, why leave it at the price
of goods? What about a variable price for labor?
Speaker 6 (13:12):
Where we're at is that robots are deciding what prices
are robuts are deciding how much workers get paid.
Speaker 2 (13:20):
Call it what you will, Dynamic pricing, surge pricing, or
surveillance pricing. It all comes down to the same thing.
Speaker 7 (13:28):
Every firm has an incentive to charge a different price
to different customers at different point in time. The reason
is because if a consumer we needs to pay is
a change in As a firm, what I want to
do is to charge your high price and when you're winning,
to pay high price, and charge your low price.
Speaker 8 (13:44):
When you're winning, to pay low price.
Speaker 2 (13:46):
John Jang is a professor at the Wharton School of Business.
Speaker 7 (13:51):
As a firm, I really have an incentive to make
sure that when you're winning to pay a high price,
I'm going to charge your high price.
Speaker 2 (13:58):
Dynamic pricing may sound revolutionary to some, but it's actually
as old as the markets themselves. What's changed is the
technology and in some cases the laws.
Speaker 7 (14:09):
If you go back probably hundreds of years and then
to the village of free markets, the vendors there obviously
just a use of the dynamic pricing. They're going to
change the price depending on who are the customers who
show up, and also depending on when you're showing up.
Speaker 2 (14:26):
Modern day dynamic pricing began in the seventies after the
airlines were deregulated nowadays, it can mean charging different prices
based on overall demand at different times, or even charging
different individual buyers according to their willingness to pay.
Speaker 7 (14:43):
Variable price in basic means that as a firm, I'm
going to charge different prices for different products in different
usage occasions and also depending on who the customers they
are dealing with. Dynamic pricing if you look at it
and really have law has multiple dimensions, and you don't
just change the price over time.
Speaker 8 (15:02):
You also charge a.
Speaker 7 (15:03):
Different prices across different products you have to sell. And
also for the same product you may actually charge you
at different prices across different customers. For the same customer,
you also charge different prices over time.
Speaker 2 (15:18):
In Norway, supermarket chain Rema one thousand has been using
dynamic pricing since twenty twelve across its six hundred and
eighty retail stores. Perhaps Sandu is Rema one thousand's head
of pricing.
Speaker 5 (15:31):
So the market in Norway is quite competitive. We want
to be cheapest on Christmas holda, so we lower the
price ten cents lower than our competitors, and they might
be having the same strategy as we have, so they'll
go even ten cents lower and then we get these
kind of rays to the bottom situations where we try
(15:52):
to beat each other and the price gets really really low. Basically,
you get lower price when the demand is high, So
we don't set the price up when the demand is highway,
we rather set the price low when the demand is high.
Speaker 2 (16:08):
Charging what the market will bear makes good sense from
the perspective of a seller like Remo one thousand. It
can help make sure that it's not being undercupp five
competitors and that no money gets left on the table.
But the buyers whose money is being taken have not
always been as enthusiastic.
Speaker 7 (16:25):
When there's a flirt with this idea of doing the
surge priceing for burgers, and that they're trying to learn
from the Woober Woober. Of course, in this particular situation,
the surge price really helps the consumers, so there wasn't
a whole lot of back lag when you surge a priceing.
On the one hand, you're going to manage the demand
simply because the more people probably will decide that they're
(16:47):
not going to take a Wooper, they're going to take
a subware, take the bus, and on so force. Most importantly,
a surge pricing will help you to do more cars
into Manhattan, so that a supply for the cars would
increase every customer who want to take a Whooper and
actually have access to a Woober. In Wendy case, that's
not the situation. When you searge a price in at
(17:08):
lunchtime when people are hungry, you don't necessarily increase your
supplying anyway, and the consumers don't see any benefit in
that surge price. And so that's why there's huge backlash
from the marketplace.
Speaker 2 (17:21):
It's not just the Wendy's experience that's drawn attention. In
the US. Senators Elizabeth Warren and Robert Casey took issue
with Kroger's use of electronic shelf labels and dynamic pricing,
saying widespread adoption of digital price tags appears poised to
enable large grocery stores to squeeze consumers to increase profits.
(17:43):
But despite some complaints, Professor Jeng says that dynamic pricing
is not always bad for the consumer.
Speaker 7 (17:50):
For instance, for the trend tickets from Philadelphia to New York, Okay,
the price can vary between ten dollars all the way
up to two hundred dollars vigilant if you know what
you're doing, if you really pay attention to the pricing,
and you may actually get the chance to buy a
trend ticket from Philadelphia to New York at the price
(18:11):
of aout ten dollars. I know my son is very
good at doing this and nowadays because it does travel
quite a bit and between Philadelphia and the New York
So in that sense, that indeed that uncertainty in this
kind of a situation, If you know what you're doing,
if you want to make an effort, it could be
beneficial to you.
Speaker 8 (18:30):
As a consumer.
Speaker 2 (18:32):
Dynamic pricing can benefit the seller of airline tickets or
supermarket items, But what if the thing being sold is
your labor? How might dynamic pricing work if applied to
how much we make for a living? The question is
not hypothetical. Any contractor or freelancer will tell you how
their take home pay can change depending on the day,
but for some workers it comes down to the minute
(18:54):
or even the second.
Speaker 6 (18:57):
So a couple of years ago, lift Awn Uber moved
into what's called algorithmic pricing. So, in other words, there
is no percentage that we actually get of the fare,
and there is no rate card that tells you how
much you're going to make per mile, how much you're
going to make per mint it. On the driver side,
(19:18):
you think, oh, well that'll be good for drivers. You know,
oh maybe they're charging me a lot, but my driver
will get that. No, because guess what they're looking for
us is our lowest fare point. So let's say you
tend to take whatever ride comes across, they will pay
you lower and lower and lower. It's death for us.
(19:39):
So if you see a twenty mile ride, come in
and they're going to pay you ten dollars for that,
that's fifty cents a mile period, you're losing money on that.
I think for me as Americans, we want innovations. We
want to be able to rely on tech. We love
our phones. All of that is really good, but we
(20:00):
you really have to look at some of the downstream
that isn't good about this tech in order to bring
it home, to protect consumers, to protect our environment, to
protect workers' rights.
Speaker 7 (20:12):
I think that for employees, salaries have always been dynamic,
and especially in an inflationary environment, they know that the
salary are on the rise, and even though that real
wages may or may not add to an increase.
Speaker 2 (20:28):
Jang says that Dynamic pricing is also a double edged sword.
Even though it can give companies more ways to compete,
it can also push them to compete away their margins
if they're not careful.
Speaker 7 (20:39):
Dynamic price and surprising is always good for a firm
in the short term. If you know what you're doing,
and if you can identify when a customer is willing
to pay high price or low price, and you have
a good way to implement it, it's always good for
you somebody because you're going to generate more incremental revenues.
You're going to in fact increase your profitability for sure.
(21:01):
But one downside with dynamic present is this. You look
at the airline industry, for instance, it's probably one of
the earliest and the most sophisticated industry where dynamic price
and was introduced. But if you look at the cumulative
of profitability for airline industry and since the regulation in
nineteen seventy eight, you know that, in fact that the
(21:24):
cumulative profitability is either zero or slightly negative.
Speaker 8 (21:29):
Okay, So there we.
Speaker 7 (21:31):
See that the industry that's very sophisticated dynamic price and
yet that the whole industry seemed to be suffering because
of it, and there is a good reason for that.
And the reason is because unilaterally, as a firm, you
want to implement dynamic prices no matter what other firms
are doing.
Speaker 2 (21:50):
One key consideration for firms looking to introduce dynamic pricing,
it matters when you do it, such as for example,
when people may be expecting some higher price is because
of teriffs.
Speaker 7 (22:01):
If you look at the terriff situation, the price and
environment is really becoming more uncertain and the most important
need that and we are putting into and an inflationary environment.
You can imagine that inflationary environment, consumers tend to be
more for giving for any price increase and the certainty
(22:23):
and would be more for giving and for price variations.
And so because of that, you can imagine us a
firm if I always want to embrace dynamic price and
this would be a good chance. And simply because if
I vary the price, the consumers property will not and
the mind as much. And the most importantly that if
I raise the price and I have alibi and to
(22:46):
tell consumers.
Speaker 2 (22:48):
And even more important than picking the right time to
move to dynamic pricing may be positioning it the right
way for your customers you.
Speaker 7 (22:56):
Want to do the dynamic discounting. I think that's a
good way to do it. In fact, you look at
the way that firms implement dynamic price and the mistake
of them making is basically that, oh, our price is
going to go up and down.
Speaker 8 (23:08):
Right, So that's the one way to do it.
Speaker 7 (23:11):
The other way to do it in the business said, well,
we have all this price, that's a regular price. We
just offer dynamic discounts right over time and everybody gets
a two fee, and so that in that situation everybody
feels better.
Speaker 2 (23:24):
Call it surge pricing, and it doesn't sound like there's
much in it for the consumers. But dynamic discounts, that
sounds more like we are all getting a trophy up next.
Rare earths are critical to our tech future, and China
has had a corner on the market. We look for
alternatives in Brazil. This is a story about a high
(23:55):
stakes game of poker between China and the rest of
the world. To China has played one winning hand after
another in the game of rare earth minerals, bluffing from
time to time to get the world to play by
its rules. But don't count out the underdogs. Our colleague
David Goura takes us to Brazil to see how the
international competition is shaping up.
Speaker 9 (24:23):
This is a very pure concentrate of rrors.
Speaker 10 (24:25):
It contains around ninety five of concentration of rrors and
in these bagders around five to six percent of this
prosumana terbum.
Speaker 11 (24:34):
These are two of the seventeen metallic elements that make
up what are known as rare earth elements. Dysprosium and
turbium are heavy rare earths used to create magnets in
electric vehicles. We went to Guyania, Brazil to see one
step in the long process of turning clay into some
of the most valuable material on the planet. But most
(24:56):
of us already interact with rare earth elements every day.
Speaker 10 (25:00):
As the world becomes more electrical, we're going to be
converting a lot of electricity into movement. No, we're seeing
that in electric vehicles, we see that in wind turbines.
Speaker 9 (25:10):
We're going to see that a lot in robotics.
Speaker 10 (25:12):
So we care about the errors that go into the
permanent magnet.
Speaker 11 (25:16):
Ramon Breua Costa is the CEO of a Clara Resources,
a mining company based in Chile. This is the company's
pilot plant in Brazil. Help me understand scales. Compare what
you're producing here to what you would need to produce
going forward. How far from that are you?
Speaker 9 (25:32):
It is very small. It is very small.
Speaker 10 (25:33):
We can process several tones of clays here, but out
of one tone we extract around one hundred rams, so
it's around zero point one percent of production.
Speaker 9 (25:42):
So for demonstration purposes it works very well.
Speaker 10 (25:45):
It will provide This pilot plant also will provide the
material that we need in order to prove our separation facility.
Speaker 11 (25:53):
A Clara gets mineral deposits that it processes. What it
can process is a drop in the bucket.
Speaker 10 (26:00):
China has an advantage because they have a type of
deposit that is called an ionic lay, and they use
it to extract these these elements. They are so important
and so scarce that China has been restricted precisely these elements.
Speaker 11 (26:14):
Brazil comes in a distant second behind China in deposits,
but deposits are just one part of the story. Another
more expensive part is processing the raw materials, and that's
where China really calls the shots.
Speaker 10 (26:29):
We do know that they discovered the ionic lay deposits
in the nineteen seventies, so they have been mining these
elements for fifty years.
Speaker 9 (26:36):
Now.
Speaker 10 (26:37):
We know that they are also attracting revers from Me
and Mark, and we know that in the case of
heavy revers, the quota of production in China has been
very stable for the last fifteen years. In vers in general,
they control around sixty percent of the market. In the
case of heay reers is probably very close to one
hundred percent of the market.
Speaker 11 (26:55):
China has also used its dominance in the rare earth
supply chain to further its political ambitions, a tactic that
Laura Taylor Khalai saw first hand as Assistant Secretary of
Defense for Industrial based Policy under President Biden.
Speaker 12 (27:10):
It's China that dominates in mining. When we take a
look at processing of rare earth elements, it's also China,
Malaysia of Japan that account for one hundred percent of
the processing, with China completely dominating that process.
Speaker 11 (27:28):
Taylor Calla was responsible for setting America's rare earth strategy
in the Biden administration. She remembers when the US was
holding the strongest hand.
Speaker 12 (27:37):
It was a time when the United States was the
dominant producer of rare earth elements and processing, and over
the years that has changed significantly. We are now importing
ninety third percent ninety five percent of our rare earths
from China, including the ones that for a while, even
(27:58):
including the ones that we use in major defense systems.
So it's a very real vulnerability and a very real
vulnerability when we know and have seen of recent and
over the years, China's willingness to use their dominance of
rare earth mining and processing to manipulate markets and to
(28:21):
stemy competitors global competitors.
Speaker 11 (28:24):
For the past fifteen years, China has used its dominance
in rare earth to get more favorable terms in trade deals.
Speaker 12 (28:32):
We need to continue this kind of minerals diplomacy as
well as take it into account in these economic and
trade negotiations. Again, you could play hardball with Canada and
with Japan and with other countries South Africa DRC, but
we also they also had things that we need, including
(28:52):
these rare earth elements, whether it's in the raw form
and mining or also in potential processing capacity industrial capacity.
Speaker 11 (29:01):
American policymakers also know that diplomacy alone isn't enough. Over
the past five years, the US has allocated hundreds of
millions of dollars to rare earth processing plans and magnet factories.
With President Trump picking up the baton from the Biden administration.
Speaker 6 (29:18):
I will also take historic action to dramatically expand production
of critical minerals and rare earths here in the USA.
Speaker 12 (29:27):
The United States hasn't completely been out of the game
and hasn't completely been blind to this. We also have
within I'll just speak within Defense in particular because I
think it's an important national security case. Within Defense, we
have taken over the years the notion of looking at
(29:49):
our defense in terms of short term priorities, particularly under
the Biden administration. According to the National Defense Industrial Strategy
that I help launch and author out of the Defense Department,
we made a concerted push for a mind to magnet
(30:10):
strategy for rare earth elements, in particular, understanding that the
F thirty five magnets or particular vulnerability, as well as
other key systems like the Virginia Class submarines and the
Columbia Class submarines. We made investments in MP materials through
the Defense Logistics Agency, which administers the National Defense Stockpile
(30:34):
through the Defense Production Act Title III, as well as
through the Industrial Base Fund. All of these things are
in existence now, and because of the investments that we
made over the last four years, and in particular of
showing Congress that we could effectively use the authorities that
we have as long as we had appropriations. I think
(30:57):
we've gotten to a point where this administry and can
really run fast.
Speaker 11 (31:02):
But Taylor Kala admits that today it's become a game
of catch up for the US.
Speaker 12 (31:07):
I think from our standpoint, mining and processing of a
rare earth is messy, it's expensive, there's a lot of
environmental issues that come up as a result. Sometimes it's
a lot easier to import these things rather than to
produce them domestically. We also don't have the workforce that
can really support of the processing and mining of rare
(31:33):
earth elements and other critical coretical minerals. China dominates in
that sense as well.
Speaker 11 (31:39):
Back in Brazil, A Claras Berua knows just how expensive
and time consuming it is to get a foothold in
the rare earth supply chain.
Speaker 9 (31:47):
I think the work that we have.
Speaker 10 (31:48):
Been able to accomplish will allow us to have a
marginal cost of production that is competitive with China. We
have created a system called the circular mineral harvesting.
Speaker 9 (32:01):
That where we do not use explosives, there's.
Speaker 10 (32:03):
No crashing and no milling, which are the two stages
that consume most.
Speaker 9 (32:06):
Of the energy in the industry. We need to make the.
Speaker 10 (32:08):
Investment, and that cost of capital is adding to our
cost of production, and that's where we lose competitiveness visa v.
Speaker 9 (32:16):
China.
Speaker 10 (32:17):
So the name of the game right now is try
to secure the lowest cost of capital possible. Governments play
a fantastic role there. There are grants available, we've seen
them deployed in several other companies. Low cost loans will
also help achieve that, and we have a clatter we're
prepared to pass through that lower cost of capital into
(32:38):
our customers in order to become a producing asset.
Speaker 11 (32:43):
Brazil is doing its part to attract miners like a
Klara to its mineral reserves.
Speaker 13 (32:48):
As a CATO, we treat the issue of strategic minerals
with great attention, care and strategy. Everything that is happening
in this context now we have already understood to be
an extremely timely and important action for Brazil and for
the world. Given our countries potential.
Speaker 11 (33:10):
In Aciomelo is the President of Brazil's Geological Service, which
is part of its Ministry of Mining.
Speaker 13 (33:18):
When we talk about change, we think about strategic minerals,
strategic and we already had this strategy before all this
the current situation. This is due to the care and
work of President Lula and Minister in partnership with them.
Speaker 11 (33:43):
One of the agency's main functions is to map out
the country's mineral resources, a critical first step in catching
up with China. Even there the odds are long.
Speaker 13 (33:55):
Around thirty percent of Brazil has been made. We know
that isn't a lot yet, but with the contract we
have just signed and this extremely advanced technology technology which
is also used by major global players such as Australia,
the USA, Germany and Canada.
Speaker 8 (34:18):
Technology.
Speaker 13 (34:19):
With this technology, our goal is to attract safe, sustainable
investments to advance the development of rare earth and other
minerals that are part of this process.
Speaker 4 (34:33):
Conditions.
Speaker 10 (34:35):
The reception that we have had in Brazil has been
incredibly good, both from the federal government and from the
local government of the state of Oyas. I think something
that should not be taken for granted is that Brazil
has a vision in terms of the role that they
want to play in the future, and that is I
would say, I would call it a contry vision. Everybody
(34:56):
shares this, and so when you present them with a
product like this is everyone wants to help.
Speaker 11 (35:02):
That need for a non China rare earth supply chain
is so great that among countries and companies, a competitive
industry has morphed into a forced collaboration.
Speaker 10 (35:12):
Very recently, I saw an article that there were forty
rareth companies already in Brazil.
Speaker 9 (35:17):
But again, we don't feel that they are a direct
competition of ours.
Speaker 10 (35:21):
No, we care only about those who can produce heavy
errors effectively.
Speaker 9 (35:27):
How are differentiating ourselves?
Speaker 10 (35:29):
I think we have two main factors that make a
CLATA very different.
Speaker 9 (35:33):
We want to do it all no.
Speaker 10 (35:35):
That opens strategic opportunities, commercial opportunities that other miners don't
necessarily have. And the other thing that I believe is
a very strong advantage of the a CLATA proposition is
our shareholders.
Speaker 12 (35:49):
No.
Speaker 9 (35:50):
Right now, the Hawkshild group owns fifty.
Speaker 10 (35:52):
Seven percent of a CLARA and the cap group owns
ten percent of a CLADA. If I start with a
Hogshi group, this is a group that has more than
a one hundred years operating in Latin America doing mining
and doing industry, doing innovation and becoming suppliers.
Speaker 9 (36:08):
You know of very sophisticated industries all around the world.
So it's in our DNA to be long term suppliers.
Speaker 10 (36:15):
And again I think that what this industry is looking
for is not molecules.
Speaker 9 (36:19):
No, they're not looking for neo imium, pressly immum. This
is prossium or terribum. They're looking for permanent magnets.
Speaker 10 (36:25):
No, so they need and the keyword right now, even
much more than price, is reliability.
Speaker 11 (36:31):
Brazil is betting that it can offer that reliability to
the world. Barua thinks Brazil has what could be a
winning hand. It just has to play its cards right.
Speaker 2 (36:42):
That does it for us. Here at Wall Street Week,
I'm David Western. See you next week for more stories
of capitalism.
Popular Podcasts
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
CrimeLess: Hillbilly Heist
It’s 1996 in rural North Carolina, and an oddball crew makes history when they pull off America’s third largest cash heist. But it’s all downhill from there. Join host Johnny Knoxville as he unspools a wild and woolly tale about a group of regular ‘ol folks who risked it all for a chance at a better life. CrimeLess: Hillbilly Heist answers the question: what would you do with 17.3 million dollars? The answer includes diamond rings, mansions, velvet Elvis paintings, plus a run for the border, murder-for-hire-plots, and FBI busts.
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Follow now to get the latest episodes of Dateline NBC completely free, or subscribe to Dateline Premium for ad-free listening and exclusive bonus content: DatelinePremium.com